REMINDER!!! Clocks Turn Back But You Must Go Forward With These Items

The end of the year brings many deadlines and opportunities for planning. Here are a few items to remember:

  1. If you are over 70 1/2 and are charitably inclined make use of the qualified charitable distribution. No income to you and a gift to charity. Discussed in a prior blog.
  2. Discuss with your CPA whether tax deadlines are extended because of hurricanes.
  3. Do not forget to take your minimum required distribution from your individual retirement account (“IRA”). The Internal Revenue Service can assert a 50% penalty if you forget!
  4. If you are a beneficiary of an IRA from a decedent who died in 2016,  then do not forget to take the first minimum required distribution by 2017 year end.
  5. If a decedent dies in 2017 and did not take his or her minimum required distribution prior to death, and you are the beneficiary of such an IRA, then do not forget to contact the custodian to make sure the minimum required distribution is made prior to year end.
  6. Make the decision to convert or not convert your IRA to a Roth by the end of the year.
  7. Discuss with your CPA the possibility of paying expenses to take deductions to reduce your taxable income.
  8. Consider making those annual gifts. You can gift up to $14,000 per person to an unlimited amount of individuals. You can also make gifts for educational and medical expenses if you pay the amounts directly to the medical and educational provider.
  9. If you are the trustee of a trust or a personal representative of an estate with a calendar year end, then be sure that appropriate distributions are made prior to year and discuss with your CPA whether expenses should be paid prior to year end to obtain a deduction.
  10. Review your estate planning documents and make sure that the documents are drafted in accordance with your desires.
  11. Keep an eye out on the new tax law that should be coming from the Joint Committee. The exclusion amount may increase to $11 million or more and the estate tax may even be repealed after 2024. Obviously. there is going to be much debate on the tax bill so nothing is finally determined. The only constant is change and change is coming.

ADVICE: Holiday season is a hectic part of the year. Start thinking about these items before all the family and the “busyness” occurs. Holiday season may also be a good time to discuss with your family those items of tangible personal property they may want so you can complete your “separate writing” disposing of specific items of tangible personal property.

WORD OF THE WEEK: Roth conversion and recharacterization. A Roth IRA is a special IRA that is funded with AFTER TAX dollars. The Roth appreciates tax free and when the distributions are distributed from the Roth (assuming that the property is held for an appropriate time), then distributions are tax free.  If you meet the income requirements, then you can convert or transfer your “regular” IRA to a Roth IRA. The cost of the conversion is the income tax price of taking the distributions from taxable retirement account and converting into a Roth account. If the conversion is not successful, i.e., you paid too much income tax on the conversion versus the return in the Roth, then, assuming done with the appropriate time period,  a taxpayer can recharacterize the Roth back into the “regular” IRA and not pay income taxes on the original conversion.


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